On a recent visit to the Entrepreneurship Lab at Pace University in New York City, my friend Jim Duffy and I watched a presentation by a student describing the business he was seeking to launch. The budding entrepreneur figured out how to produce small quantities of high-quality printed promotional products for small businesses and organizations and make money to boot. From both a business and tech proposition, this was a smart kid.
The real brilliance emerged when he started his pitch by introducing himself and the Pace Entrepreneurship Lab. “This is not a place where they teach you the skills to get a job," he said. "We are learning how to create jobs.” I turned to my buddy Jim and said, “I love this kid.”
Both Jim and I are serial entrepreneurs and alumni of Pace, so we felt a real sense of pride in watching this young small-business owner deliver a well-conceived pitch in order to raise some seed capital. In hearing his remarks, I realized that these students were working to combat one of the most pressing social and economic issues of their generation: income inequality.
Economic inequality debated. We hear a great deal these days about the growing economic inequality between the wealthy and average working people. Arguments rage, numbers are tossed about and resentment builds, yet a well-reasoned resolution remains elusive.
Amid this debate an unexpected bestseller has emerged that is brilliant and controversial, striking fear into the hearts of conservatives and liberals alike. Prominent economist Thomas Piketty argues in his popular new book, Capital in the Twenty-First Century, that neither the progressive initiatives of the left nor the conservative dogma of the right offer any real solutions.
Piketty says rising inequality is a built-in feature of capitalism and not some current aberration thrust upon the masses by the rich. A natural feature of this inequality is that equity, assets and capital grow on their own. They do not require labor on the part of the owner, thus widening the gap between those who possess capital and typical wage earners. If labor is a person's only asset, he or she will keep losing ground to the rich. Bottom line: A person can’t just collect a paycheck. He or she has to create capital.
The economic reality. People in the middle class are being squeezed from all sides and are relying on their paychecks to grow relative to their expenses. Their only investment strategy is to keep their credit card debt under control and set aside some savings. There is no talk of blue chip stocks or small-cap strategies or the long-term benefits of buying stock in Berkshire Hathaway, despite its recent downturn. These people work just to get through each week and month, hoping something is left in the cookie jar to save for a rainy day.
The fabled American Dream appears to be a concept of the past, and despite record corporate earnings, a fully recovered stock market and unemployment numbers returning to prerecession levels, wage earners are still struggling to get ahead. The middle class aspiration that each generation will do better than the last is stuck in the mud. The working guy believes that the system is gamed against him in a conspiratorial plot and that the wealthy are taking advantage of him and his peers by refusing to share equitably the fruits of their collective labor.
This inequality and division is viewed by many economists and world leaders as the defining issue of our time. It’s so powerful that it can and may destabilize much of society economically and socially and throw us back to a class division resembling an early episode of Downton Abbey.
A possible solution. It is not a question of rich or poor, upper class or lower class. It is really a question of whether a person chooses to live his or her life as an owner or an employee. This is not meant in the classic sense of the definition. Even at a company, some truly act as owners and others merely punch in, do their time and collect a check. Indeed the behavioral patterns of someone with an “owner” personality are different from those in the “employee” class. These owner types very often break out of their jobs and become entrepreneurs.
The wealth and capital that's been amassed in the world can be directly tied to those who took ownership. These are the people who have realized that if labor is the only asset they possess, an employer might always pay them a salary but they can never keep pace with the growth of capital. As many people in the merchant class of Victorian England or 19th-century America found out, ascension to a wealthier class is very often attained through the path of entrepreneurship.
So as I listened to the young entrepreneur at Pace speak enthusiastically about his dreams, ideas, solutions and new baby company, I knew that the answer to the issue of wealth inequality -- at least for those choosing to be the owners of this world -- may very well rest in entrepreneurship.